The BSE benchmark index, which had surged to 14-month high in the previous session, climbed 58.30 points at the outset but failed to sustain the momentum. It finally ended at 18,673.34, down 79.49 points, or 0.42 percent.

Out of the 30-share Sensex, 17 stocks led by HUL (3.05 pc), ITC (2.41 pc), HDFC (2.23 pc) and Cipla (1.83 pc) fell. Fall in ONGC and Reliance Industries shares also weighed down the index. A sharper downside, however, was capped by gains Bhel, M&M, HDFC Bank, Jindal Steel and ICICI Bank.

Brokers said markets fell as investors booked profits at these higher levels, amid rating agency Standard and Poor's cutting its growth forecast for India to 5.5 percent for this fiscal from 6.5 percent projected earlier.

Sentiment turned weaker as overseas markets opened lower.

"There was profit booking after a rally of nearly 1,000 points in the last few days...global markets have declined as Germany and France disagreed on when to introduce a banking union for the Euro," said Shubham Agarwal, Associate VP & Senior Technical Equities Analyst, Motilal Oswal Securities.

Second-line counters, however, were in demand and as a result BSE Midcap and Smallcap indices outperformed Sensex.